Impact of FDI on beverage business in Vietnam

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Domestic beverage brands in Vietnam face more and more competition with foreign invested companies; for example, the investment plans of the largest brewer worldwide, Anheuser – Busch InBev, to enter the Vietnamese market. Foreign enterprises have such strong economic and financial resources, they are often able to buy up most local enterprises and brands, which result in strong competition for local companies.

FDI companies’ transfer pricing technique has also created more pressure for local enterprises to compete.  Foreign enterprises have been alleged to sell their products below production costs resulting in losses, which are used as an excuse for not paying taxes. In 2009, more than 50% of FDI enterprises operating in Vietnam declared such losses; a prominent example is the Coca Cola enterprise, operating for 20 years in Vietnam but still declares losses.

Another key problem is the regulation that local companies shall not exceed 10% for advertising costs. This puts domestic companies at a severe disadvantage, as foreign companies have the means to promote their products as much as their resources will allow, while domestic enterprises are restricted by the 10% ceiling. In response to this, deputy Duong Trung Quoc of the National Assembly has stated there might be proposals to consider a non-uniform advertising percentage for different businesses, in the upcoming session of Parliament. If this would be implemented, it would provide fair conditions for domestic brands and at least at that point it would be easier for them to keep up with the foreign invested companies.

(Source: vnexpress)

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